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How To Stop Your Creditors Cold!
Wipe Out Your Debts! If you're afraid to answer the
phone because your creditors have been calling every
night; and you're worried that one of them is going
to call your boss and tell him you're a deadbeat;
and just trying to pay off your bills leaves you
almost nothing for\line food - it time you thought
about bankruptcy! With a small amount of money, a
lawyer (and even he's not necessary a lot of the
time), and a careful evaluation of your assets (what
you own) and your liabilities (what you owe), you
too can make a new start with the help of the
Federal and State bankruptcy laws. But don't rush
into this without carefully determining which is the
right way for you, for there are\line several
different ways to stop your creditors cold, and
choosing the wrong way can result in your losing
much more than you might otherwise have to. Straight
Bankruptcy Usually Costs Less, and It's Quick! If
you have very few assets, and lots of debt, and not
enough income to pay the debts off, even on an
extended plan (more\line about that later), then you
will probably have to file straight\line bankruptcy.
You must file the proper forms (or "schedules")
which you can purchase from any really good office
supply stationery store in your nearest city,
especially one in a district where there are
lawyers' offices. Bankruptcy is not a very
complicated court action, so don't be too afraid of
it. You will need to know which district you live in
for Federal Court purposes; look in the telephone
(white pages) under U.S. Government - Courts, and
locate the U.S. District Court in your nearest city.
Probably that court has jurisdiction; but check this
out by phoning the Clerk of the Court and asking
him, giving him you home address. You will have to
fill out several "schedules" or lists of your
creditors: creditors having priority, creditors
having security, and creditors having unsecured
claims without priority. You must list every
creditor, for any one that is not listed can still
sue you and collect, even after the bankruptcy! If
you don't know if a debt is secured (backed up by a
related asset, like refrigerator bought on an
instalment loan) or unsecured (made only on your
personal reputation, with no related asset), ask the
creditor. Include as a creditor the name of anyone
for whom you co-signed a loan or note, and anyone
who co-signed for you. What Will You Have Left? Will
you be put out in the cold without food, clothing
and a house to live in after your creditors get
paid? Not at all - because most State bankruptcy
laws allow some of your assets to be "exempt" from
being used to pay your creditors! You must check the
specific laws of your State, but usually, the house
you live in, the tools of your trade, your personal
clothes (within reasonable limits) and certain
specific basic home furnishings are all not taken
away from you. In fact, in this totally absurd world
we live in, many States now permit you to also keep
your TV set(!), because, apparently, they regard it
as a necessity for life! Where to File Once you have
all the forms filled out and notarized, bring them
to the Clerk of the U.S. District Court in your
district, along with $50. You don't have to notify
your creditors - the Clerk does that, while also
reminding them that now that you have filed
bankruptcy papers, they may not press you for any
more money, but may come to your hearing. Usually
your creditors don't show up, since by that time you
have filed bankruptcy, you have very few nonexempt
assets left that they are interested in. Whatever
assets you do have that are not exempt (if any) must
be sold under the Court's supervision. Any money
thus realized is added to whatever cash you may have
had at the time you filed (if any) and the total
amount (which might be, and often is, as low as $50
or $750 is divided up by the trustee appointed at
your hearing and your creditors get paid on a pro
rata (proportional) basis to the amount you owe
them. If your assets add up to an amount that, for
example, only allows each creditor 3 1/2 cents for
every dollar of debt you owed them, then that 3 1/2
cents is all he gets! About three months after you
have filed, you adjudged "bankrupt". and you can
start over again to incur, pay bills and establish a
new credit record. Be careful, however, about
talking to your old credits at this time. They may
offer to help you out by extending new credit, and
manoeuvre you into signing "reaffirmation" of your
old debt! Ready anything you sign very closely, and
don't agree to repay any debt that you have already
discharged through your bankruptcy! Lawyers for
Complications There are some people who should
definitely hire a lawyer to help them through their
bankruptcies, especially people who have\line assets
like real estate that they want, somehow, to keep.
Aside from real estate, if you have been accused by
any creditor of\line fraud, you should also have a
lawyer handle your case. If you decide you don't
need a lawyer to handle your bankruptcy, you are
still responsible for filling out all of the
forms\line accurately and completely, and every bit
as carefully as if a lawyer had done them. Leaving
out a creditor's address from a schedule, or
forgetting a loan you co-signed can bring lawsuits
against you even after your bankruptcy. So be
careful, and if you find the bankruptcy process is
too complicated, do see a\line lawyer! Keeping Your
Assets Instead If you've fallen behind in paying
your bills, but you don't want to declare straight
bankruptcy, you may want to clean up your financial
mess instead through Chapter XIII of the Federal
Bankruptcy Laws. Also known as the Wage Earner Plan,
Chapter\line XIII differs from straight bankruptcy
in two most important ways: you must pay off the
entire amount of your debts (no 10\line cents on a
dollar here), and within a 3 year period. but the
good part is you are not declared "bankrupt", so no
one ever\line knows that you needed relief under any
part of the Federal Bankruptcy Acts. The major
advantage of the Wage Earner Plan, besides not being
recorded permanently on your credit record, is that
you get to\line keep all your assets, exempt and
non-exempt alike (assuming you\line still have any
left!). This is quite important, if, for example,
you have a good paid-up car, or expensive household
furnishings or a boat or other valuable assets that
you want to keep. Under Chapter XIII, you can get
your current debts "stretched out" to three years,
which may well result in lower total monthly
payments than you are currently paying, and as long
as you pay off your debts in accordance with the
agreement files with the Court, month by month, no
creditor will be able to sue you to try to seize any
other of your assets, and force\line their public
sale at disadvantageous prices. Even if they have
begin to sue you, once you file for relief under the
Bankruptcy Act, either under Chapter XIII or under
Chapter XI, straight voluntary bankruptcy, they
can't touch you! They are immediately restricted to
getting from you only what the referee or trustee
will give them and that only after the court
proceedings have been completed. Often, if the
creditor threatens to sue you, the most effective
thing you can do to stop him (besides paying the
debt!) is to tell him frankly that, if he sues you,
you have no other recourse than to declare\line
bankruptcy. This will often make your creditor
willing to negotiate the debt, and you may be able
to satisfy him by paying the debt back, but over a
longer period of time (with smaller\line monthly
payments) than you originally contracted for.
Creditors know well that if you file bankruptcy, the
chance of their getting payment in full on their
overdue account is very low, so it is in their
interest to try to ease your credit\line burden at
least for a while. Make Yourself "Judgment-Proof" If
a creditor goes ahead and sues you, and gets a
judgment against you, he can then get a court order
directing the sheriff to seize your personal
property, sell it and pay the creditor the amount of
your debt. However, if you have no valuable assets,
there is nothing for the sheriff to seize, and you
are\line what is generally called "judgment proof",
or in other words, can't be made to pay the debt.
Because they know this is likely to happen,
street-smart debtors often hide their possessions,
or move them out-of-state, before the sheriff (or
marshal) arrives. This is, of course, illegal. The
creditor's next move is to try to "garnishee your
wages, which he does by getting a court order
directing your employer to set aside part of your
wages or salary every pay period and turn the amount
over to him. However, he can only do this if
he knows, or can find out, where you work. But even
if your wages are garnisheed, there are\line limits
on what a creditor can take! Laws vary from State to
State. In some states wages cannot be garnisheed at
all while in others only small amounts are exempt
from garnishment. If you have no job, and no visible
assets, or you live in a State where your wages
cannot be garnisheed, your creditors actually have
very few ways of ever collecting on that judgment!
Harassment and Other Creditor Tools Before your
situation gets bad enough to need bankruptcy relief,
and before your creditors actually sue you, they
will try to\line make you pay up using informal
techniques, rather than formal court orders, as this
is far less expensive and time-consuming.
First among these informal attempts may be turning
their bills over to a collection agency which may
then begin harassment, by calling you often and at
odd hours by telephone, by trying to talk to your
employer about your debts, and/or by threatening you
with legal actions, etc. Many of these techniques
that they\line use are illegal! Yes, a creditor or
agency can write you letters, call once a day
seeking payment, try to bring legal\line action
against you, but he is forbidden by law to harass
you or\line invade your privacy, or use deceptive
means to get you to pay your bills. He may not use
foul and abusive language over the telephone, tell
anyone beside you the reason for his phone call,
insist on payment for a product or service that you
claim to have a legitimate grievance about, nor
issue false threats (such as saying that he is going
to drag you into court to collect $35, when in fact
his agency's policy is not to file suit on accounts
of less than $100, because of the high legal costs
involved). He may not inconvenience you (by calling
you at work when you are not easily able to receive
calls), or invade your\line privacy (telling your
employer or your neighbor that he is trying to
collect a debt from you). There are books that
provide detailed additional information on\line
personal bankruptcy, and include sample letters with
which you\line can try to arrange "stretch-outs" on
your own with your\line creditors before bankruptcy
is necessary. Some include sample bankruptcy forms
filled out that you can use as a model. Since
the accurate filing of all your debts and assets is
so important, it's a good idea to follow their
detailed instructions closely, with or without
a lawyer, so that once you\line get your creditors
off you back, they stay off!
This article is the property of
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offering Payday Loan services since 2002. To find
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